Thirty years ago, succession in business was almost always thought of in male terms: crown prince, heir apparent, following in his dad’s footsteps. Yet, today, succession increasingly involves women, the result of their growing emergence as entrepreneurs, senior business executives and CEOs.
The implications for financial services professionals are significant. To best serve women business owners and their companies, financial services professionals must understand that succession planning with women is different.
A woman business owner has unique needs and perspectives that tend to make succession planning a longer process involving both personal and business issues, including the welfare of her executives and employees who will remain with the company after her departure.
To better understand the dynamics at work, here are three areas in particular that deserve your attention.
Bridging the gender gap
Women CEOs prepare better for succession than men. According to the MassMutual Financial Group/Raymond Institute American Family Business Survey, 49% of companies led by women have selected a successor already, compared to 40% of companies led by men.
Not only are women CEOs more predisposed to discussing succession issues, they also demonstrate keen sensitivity to gender issues. For example, woman-owned family firms are more likely to choose a woman successor as CEO. And they are more likely to have greater gender balance in the composition of their boards of directors, according to the survey.
As a result, financial services professionals who seek to serve this market need to understand and display appropriate sensitivity to gender issues that apply to the selection of successors and the makeup of boards.
Unique issues, unique needs
Notwithstanding their predisposition to succession planning, women investors, particularly professional women, face unique financial planning issues and offer unique perspectives. First, as a group they tend to be underinsured and ill-prepared, generally carrying less life insurance than men.
Why? Women executives often spend much time and effort caring for the financial needs of their families and loved ones, sometimes to the detriment of their own personal finances. Second, many women investors believe that their financial advisors do not listen to them. However, high-net-worth women often cite financial professionals as their most important source of investing advice.
As a result, the relationship between advisor and female investor can be tenuous or–when solidified through superior attention and service–valuable to the client.
These factors are particularly important for a financial services professional attempting to help a female CEO with personal financial issues in preparation for a succession. It is necessary to spend time understanding your client’s needs by exploring not only the hard financial numbers but also the feelings that accompany them.
Additionally, it is important to recognize that a female CEO, despite her success in business, might not be as financially prepared as one might assume she would be for her transition. It behooves the financial services professional to explore critical issues such as:
o living comfortably in retirement;
o protecting and growing assets;